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A Reverse Mortgage to Buy a Home? Here’s How

An article in today’s Wall Street Journal explains how Senior Home-buyers can use a Home Equity Conversion Mortgage (Reverse Mortgage) to finance the purchase of a new home, a loan. Following is an excerpt and a link to the original article.

Reverse mortgages are typically seen as a way for seniors to remain in their homes while drawing income from their property. But a reverse mortgage can also be used to buy a home.

Here’s how it works: Seniors 62 or older buying a primary residence make a down payment and pay closing costs. They then get a lump-sum loan that goes toward the home purchase. No monthly payments are required to pay down the debt. Instead, interest accrues on the loan, and the principal and interest are usually due when the last co-borrower or spouse on the loan moves out or dies.

Most reverse mortgages are FHA-insured loans called home-equity conversion mortgages, or HECMs. The loan amount is a percentage of the home’s appraised value, up to $625,500. That percentage starts at about 52% of the purchase price and rises with a borrower’s age, going up to about 75%.

Read more of the original article here: A Reverse Mortgage to Buy a Home? Here’s How

The author points out that the program is not available for use with new construction, which is a technical issue in the program guidelines.  We have worked through it with many builders and successfully financed many new construction homes using the HECM Reverse Mortgage program.

Where to Retire magazine featured another article about Reverse Purchase featuring one of our borrowers. A PDF of the article is available HERE.

Please contact me directly for more information or questions.

 

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